Signed a Personal Guarantee? They Can Take Your House (Explained in 60 Seconds)
Signing a personal guarantee means promising to pay a company's debt if the company does not. It allows the creditor to pursue you personally, potentially putting your house, savings and car at risk. Your liability may be capped or unlimited, so read the guarantee before signing.
This video is general information, not legal advice. The rules on personal guarantees, including formalities and limits, vary by country — speak to a qualified lawyer before signing or relying on one.
Key takeaways
- A company is normally its own legal person: its debts are not the owner's debts.
- A personal guarantee lets the creditor pursue the guarantor personally.
- If the company goes bust, personal assets such as a house, savings or car may be at risk.
- In many countries, a guarantee must be written and signed to be valid.
- Check whether your liability is capped or unlimited before signing.
What this video covers
The video explains what happens when someone signs a personal guarantee and their company cannot pay. A personal guarantee is an individual's promise—often made by a company director or owner—to pay a company's debt if the company does not. It begins with the usual distinction between a company and its owner: a company is its own legal person, so its debts are normally not the owner's debts. Signing a personal guarantee changes that by allowing the creditor to pursue the guarantor personally. The video illustrates the risk with a lawyer who signs a guarantee on a napkin during a round of golf. When his company goes bust, his house leaves on a tow truck. The point is that a creditor may pursue personal assets, including a house, savings or car. It then explains that, in many countries, a guarantee must be in writing and signed to be valid. Before signing, check whether liability is capped or unlimited. For creditors extending credit to a small company, a director's personal guarantee can offer valuable protection. The video provides general information, not legal advice. Formalities and limits vary by country, so speak to a qualified lawyer before signing or relying on a guarantee.
